Prima facie observations about anything

Menu

Why do we tolerate such disparity?

A recent U.S. Census report reveals that half of all Americans are either poor or near poor, according to official income thresholds. Think about that statistic for a moment. On average one out of every two people you encounter makes less than 200 per cent of the poverty level, which is about $45,000 for a family of four.

In his column for the New York Times this morning Charles M. Blow writes:

Our growing income inequality is a fact. So is the possibility that it could prove economically disastrous.

An April report from the International Monetary Fund found that growing income inequality has a negative effect on economic expansion. The report said that long periods of high growth, which were called “growth spells,” were “much more likely to end in countries with less equal income distributions. The effect is large.” It continued: “Inequality seemed to make a big difference almost no matter what other variables were in the model or exactly how we defined a ‘growth spell.’ ”

Our income inequality could jeopardize our recovery.

Yet another Gallup report issued Friday found that most Americans now say that the fact that some people in the U.S. are rich and others are poor does not represent a problem but is an acceptable part of our economic system.

If denial is a river, it runs through doomed societies.

Perhaps we were always an ignorant nation. But we seem to be willfully so over the last few decades, probably corresponding with the Great Divergence. Here are some more startling statistics, these from CBS News:

The majority of low-income families — 62 percent — spent more than one-third of their earnings on housing, surpassing a common guideline for what is considered affordable. By some census surveys, child-care costs consume close to another one-fifth.

Paychecks for low-income families are shrinking. The inflation-adjusted average earnings for the bottom 20 percent of families have fallen from $16,788 in 1979 to just under $15,000, and earnings for the next 20 percent have remained flat at $37,000. In contrast, higher-income brackets had significant wage growth since 1979, with earnings for the top 5 percent of families climbing 64 percent to more than $313,000. [By the way, Mr. Blow evidently has his facts wrong on what happened to the bottom 20 percent since 1979. He wrote: “But it rose just 18 percent for the bottom 20 percent.” CBS says that inflation-adjusted incomes in this quintile fell by nearly 11 percent over the period.]

About that Gallup poll.

More than half of the respondents, which surely includes both the poor and near-poor, said that it was either not important or only somewhat important to reduce inequality. WTF? And get this: As Mr. Blow writes, realizing the most popular strategy—growing the economy—can’t occur under conditions of severe inequality.

I’d go further. Expanding GDP requires income gap reduction. The Rest of Us spend our money on goods and services. If we have higher real incomes more money circulates in the economy to hire and produce.

Have we simply become inured to the growing gap along with the misery suffered by nearly half the population? Have so many people accepted as inevitable the workings of our capitalist system, as Mr. Blow opines?

This dismissal of financial duress would explain the ho-hum treatment given the Occupy crowds. We’ve got a lot of poverty. So what?

Take a look at the following chart (from Wikipedia), which shows selected countries’ Gini index over time.

The U.S. is neck and neck with China for third place behind Brazil and Mexico. If trends continue, China and the U.S. will overtake Mexico for second place. Come on, Americans. You can make it to the top. If you do, you’ll be recognized as the most unequal country on the planet.

You’ll notice, by the way, that just after the war, the United States was a more equal society, with a Gini index below 40. Since the 1970s, however, the Great Divergence began with an ever widening gap between the rich and the poor.